Run for cover when retailers say 'seismic'
Wake up and good morning. When I was a kid in the '60s, my grandfather -- born in 1901 and well acquainted with the Depression living in West Virginia -- used to tease me during Christmas visits about all the loot I used to get. His favorite line: "My only toy was a used door knob." I wonder how he would react to today's glut of products that he never even saw, from flat screen TVs, iPods, GPS and cable to cell phones, laptops and PDAs. Well, Grandpa seems to be getting the last laugh since consumers are thinking twice about buying much these days.
We keep hearing retailers are starting to gasp for air from a lack of spending customers. Let's dig a little deeper and see what three of the more prominent store chains operating in the Tampa Bay market say.
"Since mid-September, rapid, seismic changes in consumer behavior have created the most difficult climate we've ever seen. Best Buy simply can't adjust fast enough to maintain our earnings momentum for this year. We're beginning to adjust our cost structure to restore earnings momentum and still gain market share."
When retailers use words like "seismic" it's time to brace yourself in any available doorway. On the other hand, Best Buy isn't electronics competitor Circuit City, which this week sought Chapter 11 bankruptcy protection. And the Tweeter Home Entertainment chain is simply closing. Here's what Best Buy president Brian Dunn adds:
"In 42 years of retailing, we've never seen such difficult times for the consumer. People are making dramatic changes in how much they spend, and we're not immune from those forces."
And what of mainstay department store Macy's Inc., which swung to a loss in the third quarter as sales dropped more than 7 percent? The retailer says the holiday season will be a "nailbiter" and sees no benefit in being optimistic for next year. Macy's has 11 stores in the general area, including one at the just-opened Wiregrass mall in Wesley Chapel. Macy's says its toughest markets are California and... Florida.
Macy's chief financial officer Karen Hoguet, in a conference call (read it here) with analysts, points out the hardest hits are happening in furniture and bedding. But there are some bright spots: "We also saw in the quarter a resurgence in sales of moderate goods led by strength in private brands like Karen Scott, Style&Co, American Rag, and Green Dog," Hoguet says.
You gotta laugh, though, when one analyst asked how Macy's was using the Internet and this was the answer:
"We are testing now, in Florida, the ability of being in the store and having the sales associate say, 'We don’t have that in stock. Let me get it for you on macys.com,' which so far seems to be working very well. So we are encouraged by not only what dot-com can do on its own, but more importantly how it is being integrated into the marketing and merchandising for the stores as well."
Maybe I just don't get it, but come on! Telling a customer "We don't have it but let's order it online" sounds about as cutting edge these days as Ug telling Lug: "You hungry? No food. Go hunt."
Let's round out the retail look with a more upscale provider of goods: Neiman Marcus, an anchor at International Plaza in Tampa. It's telling the Neiman Marcus Web site opens with a page of Manolo Blahnik thong sandals. Just $875 but -- here's the beauty at this level of retail -- the gift wrapping is free!
I digress. Let's look at Neiman Marcus' own numbers for four weeks this October, provided here by the Dallas-based company:
Nov. 1, 2008 Oct. 27, 2007 Percent Change
Total Revenues $286-million $383-million (25.3 percent)
Ouch. But can you blame Neiman customers? Hard to focus on high-end baubles when your extensive stock portfolio is dropping faster than a pair of $15,200 Roberto Coin hoop earrings. Here's Neiman CEO Burton M. Tansky:
"We expect retail demand will remain weak for an extended period of time as our affluent customer reacts to the continuing volatility of the financial markets."
So, let's look at the adjectives of these season retail executives. Seismic. Nailbiter. Never seen such difficult times. Let's face it. If retailers were on a theme park ride in this economy, it would be SheiKra at Busch Gardens. Without the seat belt.
-- Robert Trigaux, Times Business Columnist